Company Disputes: What They Are and How to Avoid Them
Disputes are an inevitable part of running a business. Partners, shareholders, directors, employees, clients, and suppliers can disagree on a wide range of subjects and for many different reasons. Dealing with such bumps in the road is very common and is something every business faces at some point in time.
However, if commercial disputes are not resolved speedily and satisfactorily, they have the potential to escalate quickly and can severely threaten a business’s operations and derail its future trajectory.
In this blog, our Commercial Disputes team considers some common causes of company disputes and looks at the main ways to avoid them.
What are Company Disputes?
Company disputes are disagreements that arise as a result of business activity.
There are two main types:
- Corporate disputes are internal disagreements about how the business should be managed.
- Commercial disputes result from your relationships with another party, such as suppliers and customers.
What are some examples of Corporate and Commercial Disputes?
Disagreements between parties can arise for many reasons and can vary in severity and complexity. Some of the most common forms of dispute include the following:
Internal Disputes. Disagreements between partners, directors and shareholders of a company are commonplace and usually arise because of personal differences or disagreements over decisions about a business’s direction. Internal disputes can be highly disruptive and severely threaten a business and its reputation.
Contract Disputes. Contracts are the glue that binds the operations of a business together. Most businesses need a range of contracts with a variety of parties, and they can take many different forms. Typical commercial contracts include employment contracts between employer and employee, contracts for different suppliers of goods and services, franchise agreements, agency and distributor contracts and banking and finance agreements.
However, contracts can easily cause a business to come unstuck. Issues can include parties disputing the terms of a contract, parties failing to stand by the terms of their original agreements, or contracts needing to be renegotiated and parties being unable to agree on certain terms.
Professional Negligence Claims. Professional negligence claims cover a broad range of disputes. They are made against any professional who has not fulfilled the obligations they were hired to provide by failing to perform to a reasonable standard and with reasonable care. Examples can include your company suffering from a data loss due to an IT provider’s errors or your business being faced with an unexpected tax bill because of inadequate financial advice.
How are Company Disputes Resolved?
A trip to court to resolve a business dispute is usually considered a last resort. Instead, it is far preferable to try to resolve any commercial disputes by using alternative dispute resolution (ADR). There are four main types of ADR in the UK, and all are generally considered cheaper and quicker than litigation, while also having the appeal of maintaining a company’s privacy.
The main types of ADR are:
- Negotiation. This is usually considered the first port of call for those looking to resolve a dispute and involves the parties attempting to negotiate a compromise or instructing dispute resolution specialists to negotiate on their behalf.
- Mediation. The role of a mediator is to act as a jointly instructed neutral party and help with the communication between the parties to achieve a resolution.
- Conciliation. This is a popular choice for employment disputes and is a compulsory process for employees seeking to bring a claim to the Employment Tribunal. A third-party conciliator is instructed to discuss the issues and offer their own opinion to help the parties reach an agreement.
- Arbitration. An arbitrator is a neutral third party and an expert in the field of disagreement who listens to both sides of an argument before coming to a final decision that is then legally binding.
What can you do to avoid Company Disputes?
Every commercial dispute is different, and each must be considered individually so that appropriate action can be taken.
However, there are some general points of good practice that every business owner can do that will help reduce the chances of disputes arising in the first place and protect a business should any disputes occur further down the line. These include:
- Undertake due diligence before entering into new commercial relationships with suppliers and other parties.
- Make sure all contracts are adequately drafted and include the correct terms. This applies to employment contracts with members of staff, commercial contracts with external suppliers and any other forms of contract that your business needs. Robust contracts that clearly state each party’s rights, responsibilities, and liabilities and that are legally enforceable, are the foundations on which every successful business stands. Contracts should be reviewed regularly and renegotiated if a situation is going to change.
- Partnership agreements. If you are currently operating your business as a partnership or considering starting one, you should have a partnership agreement. A partnership agreement will set out the respective rights and responsibilities of the partners and will almost certainly help to settle business conflicts should they arise.
- Be proactive. As soon as a problem arises, try to address it quickly and resolve it as soon as possible by the appropriate means. You should seek specialist legal advice immediately to ensure a situation doesn’t escalate and so that you know where you stand from the start.
For more information about commercial disputes, please click here to read our Top 10 Tips for Handling Business Disputes.
Company Commercial Dispute Resolution Lawyers
If you are a business owner involved in a dispute or are starting a new business and want to know more about what you can do to protect yourself from future disputes, please contact Eric Robinson Solicitors today.
At Eric Robinson Solicitors our specialist lawyers will explain all the options and help you explore the best one for your business. We will always give you the best practical and strategic advice to fit your needs.
To find out more about how we can help you, please call us on 02380 218000 to speak to one of the team.
This blog post is not intended to be taken as advice. Information could have changed since the article was published. If you are seeking legal advice, please get in touch with our team of solicitors to discuss your matter.